U.S. Postal Service Reports $1.3 Billion Loss

Postal Service Reports $1.3 Billion Loss (Wall Street Journal, Feb 8, 2013):

WASHINGTON—The U.S. Postal Service on Friday reported a $1.3 billion loss for its fiscal first quarter, highlighting the agency’s financial strain even during the historically profitable holiday season and election period.

The Postal Service earlier this week said it planned to eliminate Saturday delivery of mail, but not packages, in August in an attempt to trim losses. Postmaster General Patrick R. Donahoe said the move is expected to save $2 billion a year.

The loss for the October-through-December period compares with a $3.3 billion shortfall a year earlier. A continued decline in first-class mail and a congressional mandate to set aside more than $5 billion a year for future retiree-health-care expenses were the driving factors for the most recent loss, the Postal Service said.

“We have mitigated our losses,” said Chief Financial Officer Joe Corbett. “However, our liquidity concerns can only be fully resolved if Congress takes action to address our unsustainable business model.”

Mail volume and associated revenue have been declining for several years, but the holiday season and heavy campaign mailing ahead of November’s presidential election eased the typical decline. For the quarter, operating revenue declined less than 1% from a year earlier to $17.7 billion.

Holiday cards and gift shipments typically make the last three months of the year the most profitable period for the Postal Service. The shipping business did well during the quarter, increasing 4.7%, but first-class-mail volume declined 4.0%.

The Postal Service recorded a $15.9 billion loss for the fiscal year ended Sept. 30, 2012, the largest deficit in its history.

Restricted from raising stamp prices beyond the rate of inflation and saddled with retiree obligations, the agency has few other options to reverse losses. The Postal Service is closing or consolidating some 200 processing plants and has cut hours or relocated many post offices.

Mr. Donahoe has asked Congress to reduce the retiree-benefit mandate and has sought permission to break away from federal health-care coverage and start its own plan, which he said would be less expensive, but so far lawmakers haven’t approved the changes.

“We urgently need Congress to do its part and pass legislation that allows us to better manage our costs and gives us the commercial flexibility needed to operate more like a business does,” he said Friday.

Some lawmakers are concerned about the plan to end Saturday mail. Since 1983, lawmakers have included a provision in budget laws for six-day-a-week mail. Mr. Donahoe said the agency can legally cut a day from its delivery rounds because the government is currently operating under a stopgap funding measure, rather than normal budget legislation.

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